MAD MONEY...MAD MARKET??

The efficient market hypothesis (EMH) has been a highly controversial topic among financial academics for decades, and CNBC's Jim Cramer is adding fuel to the fire. Volumes of journal articles, studies and other types of scholarly works have been churned out by supporters and critics of this hypothesis and the topic continues to be debated. Read on to find out how Cramer's in-your-face stock recommendations on CNBC's "Mad Money" provide evidence that the market behaves inefficiently.

Implications Of EMH

The efficient market hypothesis contends that all equities are priced in a manner that reflects all relevant information about the stocks and/or the market. One implication of EMH suggests that because market prices should instantly reflect information as it occurs, performing research through fundamental analysis should not yield any new information that can allow an investor to make market-beating investment decisions.


According to EMH, market efficiency also causes prices to be unpredictable and, therefore, technical analysis should not be able to yield indicators and chart patterns that serve predictive purposes.

Keep in mind that these implications are based only on EMH theory; there is much debate about the extent to which markets are efficient - or whether they are efficient at all. For example, counter to EMH, there are examples of investment strategies where fundamental analysis has proven to be successful. In fact, the "Oracle of Omaha", Warren Buffett, has earned consistantly market-beating returns for several decades by using fundamental analysis to pinpoint underpriced companies.

The Study

Researchers from Northwestern University's Kellogg School of Management released a study called "Is the Market Mad? Evidence from 'Mad Money' " in March of 2006, which showed how Jim Cramer's recommendations on "Mad Money" have created a predictable trend, which some investors have used to make fairly high returns in a relatively short time frame.

For those who aren't familiar with "Mad Money", the show's host, Jim Cramer is a former hedge fund manager. On "Mad Money", Jim Cramer gives his buy/sell recommendation on a number of featured stocks, including stocks suggested by viewers' phone calls or emails. The show has become very popular - its entertaining nature about financial matters attracted more than 300,000 viewers nightly in 2006.





In this study, researchers had gathered stock returns, daily volume data, intraday quotes and other kinds of financial information on buy recommendations that Cramer made between July 28 and October 14, 2005. One of their key findings provides proof of the existence of the "Cramer bounce". According to the study, Cramer's buy recommendation causes a statistically significant short-term rise in the stock's price on the day directly following the day it is recommended. This rise is most apparent for small stocks, where the increase is just over 5% compared to the previous close. For the entire sample, the average rise is almost 2%.


Does this study suggest that Cramer has a knack for finding undervalued stocks at the right time? No. Instead, the researchers in this study theorize that stocks become overpriced because a large number of "Mad Money" viewers blindly buy stocks based on Cramer's recommendation. In other words, these rises were not attributed to any new news that companies had released and, most importantly, they were not sustained for very long. In fact, the study demonstrated that these increases faded away within 12 days. The inflation in stock prices that occurs as a result of Cramer's recommendations allows clever investors to obtain higher returns and, therefore, serves as evidence against the efficiency of the market.





The study also found that trading volume on the stocks that Cramer recommended also spiked dramatically. For smaller stocks, the trading volume increased by as much as 900% on the day following the recommendation. The most interesting effect is that, in some cases, the level of turnover stayed significantly elevated for as long as 16 days after the recommendation was made. It also appears that Cramer's recommended stocks generally receive much higher buyer-initiated trades on the day following a recommendation to buy. This may reflect a flood of purchase orders from regular "Mad Money" viewers. This peak in the proportion of buyer-initiated trades ultimately drops back to pre-recommendation levels after about 12 days. This suggests that Cramer's recommendations have a direct effect on stocks' prices.

Other Effects

The Northwestern researchers also looked at two other aspects of Cramer's recommendations: their effects on the bid-ask spread and the amount of short selling in the market.

According to the study, short sales tended to spike dramatically within the opening minutes of the trading day following Cramer's recommendation. Because successful short sellers borrow stocks to sell when prices are high and then buy them back to cover their positions when the prices are low, it could be inferred that at least some investors are aware of the Cramer bounce and are attempting to profit from what they see as an overvalued stock.


It was also determined that the bid-ask spread for recommended stocks did not change at any point in time. This is significant because a lack of change in the bid ask spread suggests that market makers do not fear the prospect of information asymmetry as a result of Cramer's recommendations. This is because nothing new about the stock has surfaced during that time and, therefore, the current bid-ask spread should still reflect the stocks' fundamentals following Cramer's recommendation, even if the market value of the stock does not.

Why Is This Important?

One of the biggest assumptions (and potentially the biggest flaw) of the EMH is that investors are rational. This study provides evidence that the irrational behaviors of individual participants in the financial world can create predictable, collective actions that can have at least a short-term influence on stock prices. For the most part, it can be assumed that the investors that are contributing to the Cramer bounce phenomenon are making stock purchases as a result of Jim Cramer's influence, rather than as a product of rational thought.


As a general rule, emotional investors that buy stocks without doing their homework tend to miss out on good returns. In this situation, Cramer's recommendations are expensive in the days after being featured on "Mad Money" and, all things being equal, will tend to lose value as their prices settle back to pre-Cramer bounce levels.


Social Learning TheoryIn psychology, the observational, or social learning theory details certain conditions that need to be met before an observer's behavior changes as a result of observing a model's behavior. One of the key points of this theory is that an observer is more likely to pay attention and follow another person's behavior if that person possesses qualities that the observer finds to be desirable. Jim Cramer's recommendations can easily sway the more emotional investors into performing trades without conducting a good amount of research, because many may feel that he is an authority on stocks and that his word should be good enough.


This study also found a way for certain traders to almost consistently create a steady stream of returns. More specifically, this refers to how short sellers can regularly take advantage of the Cramer bounce and short sell stocks on the day following the recommendations and then buy them back a couple of days later to earn an almost arbitrage-like profit. According to the EMH, consistently predicting and capitalizing on the market's movements should be impossible because the market moves in an unpredictable fashion.


On the flip side, we should note that the stocks' prices did eventually return to their "true" values. Therefore, while the behavior of stocks featured on "Mad Money" isn't consistent with EMH, this study also shows that stocks are (eventually) driven by fundamentals. While in this case the stocks returned to their original values in a short time span, bubbles of this sort can also continue for years, as was the case with the dotcom bubble of the late '90s.

Dont Go Mad Yourself

EMH relies on the assumption that the main players in the market are rational. This study is an example of how irrational behavior can cause stock prices to fluctuate in a manner that is contrary to EMH theory. Investors should not discount the role that emotion and investor psychology play in the way the market behaves. While there is no formula or indicator that can account for or assess the emotional aspects of investing, investors can save themselves from being caught up in "madness" by investing prudently, rather than just following the crowd.

Source : By Albert Phung @ http://www.investopedia.com/

TO BE A CHAMPION TRADER THINK LIKE THEM

I meet and learn from Champion Traders every day. Not just in trading rooms but in Champions of other fileds like Sports,Arts, Music etc. I’ve learned that to be a champion you must Think Like a Champion. Champions think differently than everyone else. They approach their life and work with a different mindset and belief system that separates them from the pack.

1. Champion Trader Expect to Win – When they walk on the court, on the field, into a meeting or in a trading room they expect to win. In fact they are surprised when they don’t win. They expect success and their positive beliefs often lead to positive actions and outcomes. They win in their mind first and rest comes by default.

2. Champion Trader Celebrate the Small Wins – By celebrating the small wins champions gain the confidence to go after the big wins. Big wins and big success happen through the accumulation of many small victories. Its similar to every trade cannot be a blockbuster trade they comes once in a while. This doesn’t mean champions become complacent. Rather, with the right kind of celebration and reinforcement, champions work harder, practice more and believe they can do greater things.

3. Champion Trader Don’t Make Excuses When They Don’t Win – They don’t focus on the faults of others. They focus on what they can do better. They see their mistakes and defeats as opportunities for growth. As a result they become stronger, wiser and better. Champion Traders do not blame market for their losses but introspect within themselves and try to correct mistake and vow not to repeat again.

4. Champion Trader Focus on What They Get To Do, Not What They Have To Do – They see their life and work as a gift not an obligation. They know that if they want to achieve a certain outcome they must commit to and appreciate the process. They may not love every minute of their journey but their attitude and will helps them develop their skill.

5. Champion Trader Believe They Will Experience More Wins in the Future – Their faith is greater than their fear. Their positive energy is greater than the chorus of negativity. Their certainty is greater than all the doubt. Their passion and purpose are greater than their challenges. In spite of their situation champions believe their best days are ahead of them, not behind them.

If you don’t think you have what it takes to be a Champion Trader, think again.





Champion Trader aren’t born. They are shaped and molded.


And as iron sharpens iron you can develop your mindset and the mindset of your team with the right thinking, beliefs and expectations that lead to powerful actions.

Source: http://www.brameshtechanalysis.com/2015/10/to-be-champion-trader-think-like-them/

THE REAL REASON WE TRADE EMOTIONALLY

OK, so here comes one of my best posts.

Ready?

I'll give you a view you won't hear from any mentor, coach, guru, or furu.

Why do so many traders talk about trading being a mental game and making bad trades because of emotions? Why do you find yourself making the same mistakes again and again, making money only to lose it?

Is it because you lack discipline? Is it because you cannot control your emotions? Is it because you don't stick with a trading process?

No.

You have emotional problems in markets because you're the market's bitch.

You heard me right, Mr. Independent Trader who doesn't want a 9 to 5 job and wants to only work for himself. You're the market's bitch.

From open to close, you're hanging on every market tick, letting it sway your thoughts and feelings.

When the market treats you well, you feel good. When it treats you poorly, you feel like crap. When the market's not moving, you don't know what to do.

If you behaved that way in any relationship--with your boss at work or your spouse at home--everyone would see that you're someone else's bitch. But with markets, you tell yourself it's dedication, it's a passion for trading.

Bullshit. You the market's bitch.

You have a relationship with the market and anytime you're controlled in a relationship, you're the bitch.

The only way to have an even relationship with the market is to control when you play, so that you don't get played.

That takes rules, that takes finding and sticking to edges--and it takes the willingness to not play when your edges aren't screamingly apparent.

What you got ain't passion for trading; it's a need to play.

If you need to play, you're going to get played. You're going to be controlled by market behavior. You're going to be the market's bitch.

Source: By Brett Steenbarger @ http://traderfeed.blogspot.in/

TRADING SUCCESS MANTRA FROM JOHN MURPHY

“My work has gotten better due to simplifying my approach,” John J. Murphy



Murphy said he relies heavily on five or six “useful” technical indicators, including relative strength indicators, trendlines, moving averages, Bollinger bands, classic chart patterns such as triangles and double tops, and Fibonacci retracement levels.

“You must trade a combination of technical signals, not just one” indicator, said Murphy. He said that many times he’ll set up a “good” column and a “bad” column regarding technical studies. If the “good” column has the overwhelming evidence supporting a selected trade, Murphy will enter the trade. But if the evidence supporting a trade is not strong enough, he’ll bypass the trade.

On moving averages for individual stocks, Murphy likes to use the 50-, 100-, and 200-day moving averages. If the 200-day moving average on an individual stock is broken on the downside, “big trouble” is in store for that stock. Also for stock sectors, he said if a 50-day moving average breaks down, “that sector is in trouble.”

Another good technical indicator is the Moving Average Convergence Divergence (MACD), said Murphy. The MACD uses exponential moving averages, as opposed to the simple moving averages used with an oscillator. Gerald Appel is credited with developing the study.

Longer-term technical signals are more powerful than shorter-term signals, said Murphy. “Longer-term charts give you the value of perspective,” he said.

Many traders consider Murphy’s book, “Technical Analysis of the Futures Markets” to be the bible of technical analysis.Murphy heads his own consulting firm, based in Oradell, N.J.

Source: http://www.brameshtechanalysis.com/

WHY THE ACTIVITY LEVEL KEEP INCREASING !!

This article is written by CA PV Subramanyam @ http://www.subramoney.com/

In 1979 when I did my first trade, I had to walk to my broker’s house in the night and discuss what to buy and sell. Sure we both had phones at home (2 phones each actually) but most of the talk happened face to face. He would call around 5 pm or later to confirm that a transaction was done or not done.

 If somebody dropped dead at 11am, I could do NOTHING to access him because he / his representative would be inside the ring of the BSE. And I thought I was trading too much – I would do small transactions – perhaps one a day. That was too damn high. There was a physical limitation of how many transactions got done.

 Then came online brokerage. Your broker sat on a terminal and did the transactions – obviously volumes went up from Rs. 250 crores to about Rs. 25000 crores. Stunning, but yes, that was the kind of jump. 

Today’s investor is bombarded with ‘data’ pretending to be information. He is inundated with data. Views. Opinions. Interviews. 

Cost as the only consideration of choosing banks, fund managers, term insurance, distribution channels. So sudden switches, closures, re-starts. Again pointing towards activity. 

Every day, week, month people open their computers, phones, or whatever to decide whether to buy or sell and what to buy or sell. 

Every day the poor investor is bombarded on television, on the net, on his phone about what he should do NOW or face death!!

 Every day a chartist calls him or pings him to sell him a newsletter. 

Everyday some bank / brokerage house wants me to borrow money, invest, insure, switch loans, – again calling for action. 

Actually I have no clue what would have happened if I had left my 1995 portfolio as it is and done NOTHING at all. It had 300 shares of Infosys!!

 There is nothing wrong with information, but it is making lazy people lazier. They are happy to believe what they see in print. On investment forums. On blogs. In pink papers. In newsletters.

 Do not do that. See if it is accurate. Learn to read the balance sheet. Many of these stories are written by the machine. Accurate and stupid. So go beyond the story. Go behind the numbers. As soon as Infosys posts one quarter of good results there are ‘strategic management articles’ saying how Sikka is a great strategist. Hey what is the hurry to judge? One quarter bad results from Ta Mo and people are willing to say “Ta Mo” is doomed and finished. Oops guys get curios.

RBI CUTS REPO RATE BY 50 BPS- KEY TAKEAWAYS FROM THE MONETARY POLICY

The Reserve Bank of India cut the benchmark repo rate—the rate at which RBI lends to banks—by 50 basis points, lowered inflation forecast for January 2016 to 5.8 percent from 6 percent earlier, and kept the cash reserve ratio unchanged.

“Investment is likely to respond more strongly if there is more certainty about the extent of monetary stimulus in the pipeline, even if transmission is Slow,” the RBI said in its statement, on the reason for a 50 basis points-cut when the market was expecting a 25 basis point reduction. 

Following are the key takeaways from the RBI monetary policy.

* Global growth has moderated, especially in emerging market economies (EMEs), global trade has deteriorated further and downside risks to growth have increased.

* EMEs caught in a vortex of slowing global trade volumes, depressed commodity prices, weakening currencies and capital outflows.

* Tentative (domestic) economic recovery is underway, but is still far from robust, due to sustained decline in exports, rainfall deficiency and weaker than expected momentum in industrial production and investment activity.

* First advance estimates indicate food grain production expected to be higher than last year.

* Manufacturing growth uneven in April-July, though in expansionary mode for the ninth month in succession.

* Aggregate demand weak, but low input material costs, boosting margins for most producers.

* Commodity prices to be contained for a while, but more domestic demand needed to offset weakening global demand and boost domestic investment cycle.

* Construction activity weakening as reflected in low demand for cement and the large inventory of unsold residential houses.

* Rising public expenditure on roads, ports and eventually railways could, however, provide some boost to construction going forward.

* Services PMI in expansion for the second consecutive month on improving new business, but business expectations remain subdued.

* Inflation ebbing on a combination of low month-on-month increases in prices and favourable base effects, but price pressures in pulses and onions high. 

* Inflation likely to go up from September for a few months as favourable base effects reverse. Outlook for food inflation could improve if increase in sown area translates into higher production.

* Rural wage growth remains subdued and corporate staff costs decelerated.

* With services exports moderating, widening of the merchandise trade deficit could lead to modest increase in the current account deficit during Q2. 

* GDP forecast cut to 7.4 percent from 7.6 percent due to slower global growth, lack of appetite for new investment in the private sector, constraints of stressed assets on bank lending and waning business confidence.

* Continuing policy implementation, structural reforms and corporate actions boosting productivity will be the primary impetus for sustainable growth.

* RBI stance to continue to be accommodative; to work with government to ensure that banks pass on bulk of the cumulative 125 basis points cut.

Source: http://www.moneycontrol.com/

FIVE REASONS WHY I WILL NEVER INVEST IN REAL ESTATE

Here are five reasons why I will never invest in real estate.  This is me taking sides on the equity vs. real estate debate. There is more to investing than returns. So instead of comparing past returns of both asset classes and claiming equity won or real estate won, I would like to consider other important aspects.

So here goes. I will never invest in real estate because,

1) It will skew my asset allocation perhaps forever

Personal finance has two components: insurance (or fortification) and investment.

Investing is all about the right asset allocation. I don’t want to ‘invest’ in an asset that will grab a big chunk of my asset allocation pie perhaps forever.

There are two ways to buy real estate: dip into your liquid net worth and/or leverage.  Even if we assume leveraging does not backfire, I will never be able to find the right balance in my asset allocation.

It is never real estate and equity and fixed income. It is always REAL ESTATE and equity and fixed income. Once I choose to buy real estate, it may take years, if not decades, for other asset classes to occupy a significant portion of your portfolio. I do not find that appealing.

Why would I buy an asset class that practically eliminates my ability (see below) to freely control asset allocation percentages?

2) It is hard to assign "present value" and calculate "growth"

I have a real estate returns calculator, but obviously its output depends on inputs! Most people talk about how much their property is worth without actually speaking to potential buyers. It is only when they do so, reality dawns. They would rather ‘wait’ and enjoy low rental yields rather than sell for a ‘low’ price. There is no designated market price. He who haggles the best, wins here.  If there is no universally agreed market price, I cannot understand how risky the asset class is.

I am afraid I do not have the ability to transact without data or wait indefinitely for the right buyer to come along. Would like to buy and sell stuff with a universally accepted price tag attached to it. Would like to buy asset classes with quantifiable volatility.

3) It is not liquid enough when I wish to sell.

This I am sure you have heard before: You cannot sell a small chunk of your property when you feel like, unlike marked to market asset classes which can typically be traded in small amounts and on any business day.

Whether I trade for profit or loss, the freedom and the ease associated with the transaction appeals to me.

4) It may not be liquid enough even after I sell.

The taxman considers capital gains from real estate to be a different species. While there no rules ‘what should be done’ with capital gains from equity or fixed income, real estate CG should necessarily be reinvested in property or in section 54EC bonds (with pathetic post-tax returns – close to SB account returns for 30% slab) for 3 years to ensure the capital gains are tax free.

I recently advised a family to pay tax,  equivalent to 16%  of selling price, and enjoy the liquidity from a real estate purchase.  This is much lower than the 30.9% tax on monthly income they were paying. However, they did not see it that way. For them, the loss of “several lakhs” to the taxman was unacceptable.  They would rather let that sum languish in another property or in an infra bond for 3 years than pay “that much tax”.

If one does manage to sell, and pay the capital gains tax, this reason does not apply, but then again …

Will such logic escape me, if I sell property? I don’t know. Why would I enter an innumeracy trap on my own accord?! I would rather not own any investment property.

5) It has emotional attachment issues.

Many retirees who do not have the means of inflation-protected income ought to sell their invested properties for enough liquidity. Not many are able to do that. They are too fond of their ‘achievements’ and/or want to leave that as estate to their children. They believe it is their duty as parents to leave behind property to their children. Some who do want to sell are shocked at the actual selling price!

Again, will such logic escape me, if I need to sell property when I retire? I don’t know. Why buy an addictive asset class and risk financial independence in retirement?

Like I said, there is more to investing than returns.

PS. for the price the broker quoted the above-mentioned family, the CAGR over 20 years was 14%. When buyers came to see the apartment, no one was ready to gift the family ‘that much’ return. Last I heard, they have ‘shelved’ the idea of selling.

V Muthu Krishna suggested I add two more reasons:

6) Risk before possession.

These include legal risks of ownership, delays by builder, non-completion of all amenities, stay orders, deviation from plan, quality issues, etc.

7) Risk of renting out.

No guarantee of regular income. One may need to constantly look for tenants. Issues with paying property and water tax, and the legal hassles associated with tenants not moving out!

Source: http://freefincal.com/

HEY TRADERS.. SOME EXTRAORDINARY OFFBEAT DESTINATIONS AROUND DELHI FOR UPCOMING 3 DAY HOLIDAY 2-4 OCT

Hello Traders !

Highly Volatile September Series came to an end, We saw high of 8055 and low of 7539 range of 516 points sentiments of traders moving from extreme negative to positive but overall from August to September expiry nifty moved just 81 points (Close of August Series 7948 and Close of September Series 7868) suggesting it  was expiry for Option Writers. 7900 CE/PE combo was trading at 500 during September series has expired at just 32 Rs. For October series we need to close above 7958 for bullish move else any close below 7767 can see bears taking upper hand and nifty moving towards 7539/7422.

Nifty chart between 27-Aug to 24-Sept

The last month was very volatile, mainly driven by global cues, china concern, the FED etc. High volatility, fight between bears and bulls, humors, concern about global economy, slowdown etc was fatigue, stressful for many traders which resulted in anxiety, frustration and tiredness.

The upcoming 3-day holiday, 2nd to 4th October is a great opportunity to RELAX AND RECHARGE yourself. You may use the holiday to spend some quality time in nature's lap, away from your screen, away from your clients, away from your advisers, away from all the hip-hops and chit chat. To spend some time with yourself and your love ones.

It will surely relax you mentally, physically and spiritually! And when you will be back to your screen on  5th- October you will feel more energized more focus.

So what are you waiting for? Just pack your bags, make the arrangements..

I am just sharing some fantastic places near Delhi  (by the way I live in Delhi) you may check some.

While most of the best known tourist places near Delhi are swarming with tourists during the peak seasons, it’s always better to travel to places that are lesser known. There are numerous offbeat destinations near Delhi that has survived the rampant wave of commercialism.

Places that aren’t yet well known may have some drawbacks, like scarcity of activities after sun down and extravagant accommodation options. However, the much needed peace and tranquillity is guaranteed.

1) Pangot- A birdwatcher's trove

A charming little hill town located in the Nainital district of Uttaranchal, Pangot is like a paradise for nature lovers and bird watchers. With around 580 bird species been recorded in this area, you are bound to encounter a few fluttering colourful feathers. Even though it’s counted as one of the offbeat places around Delhi, the resorts here are gorgeous and will make your holiday worthwhile.

Distance: 310 KM

Nearest Railway station: Kathgodam

2) Binsar- Towering peaks to roaring predators

Binsar is breathtakingly surreal! From the vivid view of the Trisul and Nanda Devi to its lush wildlife sanctuary, Binsar has it all to lure your wanderlust. Perched up at 2400 meters above sea level, it is one of the highest hill station in the Kumaon region. It’s still one of the fairly offbeat destinations around Delhi that is not yet commercialised by tourists.

Distance: 400 km

Nearest Railway Station: Kathgodam

3) Fagu- A hamlet of stone houses

Fagu is an enchanting little hill town in the Kufri region of Shimla. You can have a glimpse of the majestic Himalayan summits from here. Dotted by little stone walled houses and lush green plantations, it’s definitely one of the most charming offbeat weekend getaways near Delhi. Make sure to be a part of the ski fest if you’re here in February.

Distance: 380 km

4) Darang- A whiff of freshness and refreshments

Another Himachali beauty, Darang is located near Mcleodganj on the road to Palampur. Walk through lush tea gardens rolling over the hills and mesmerise to the sound of toads and chirping of birds. It is one of the offbeat holiday destinations near Delhi from where you can view the majestic Dhauladhars standing tall over the delightful hamlet.

Distance: 435 km

5) Kausani- Charming meadows adorned by pine and oak trees

Another undiscovered Kumaoni beauty, Kausani is the best place to view the majestic massifs of Nanda Devi, Trishul and Panchachuli in their full glory. There are a few 12th century temples in Bajinath that you can visit and the view points from where you can witness the mountains. It's one of the offbeat weekend getaways near Delhi in Uttarakhand that has managed to retain its natural form.

Distance: 398 km

Nearest railhead: Haldwani

6) Munsiyari- Gear up for Panchachuli

Munsiyari is a popular destination among mountaineers and trekkers, but it’s still counted as one of the offbeat destinations near Delhi since it’s not yet frequented regularly by tourists. The best part about this quaint little hamlet in Uttarakhand is that you can have a vivid view of the Panchachuli peaks from here. It is also the starting point for the Milam glacier trek.

Distance: 572 km

Nearest railhead: Kathgodam

7) Naukuchiatal- The lake with nine corners

Naukuchiatal is a surreal destination in Uttarakhand. Flanked by Bhimtal and Nainital on either sides, this picturesque hill town is best known for its placid and beautiful lake which is the deepest in the region. Another amazing feature of this place is the independent art and music festival, Escape.

Distance: 320 km

Nearest rail: Kathgodam

8) Kanatal- For a little adventure and tranquility 

Situated between two extremely popular and commercial hill stations Mussoorie and Chamba, Kanatal is so far one of the offbeat places near Delhi that offers absolute tranquility and peace. There are a few awesome properties by famed hoteliers like Club Mahindra and there are also few adventure camps that offers exciting activities amid the hilly terrains.

Distance: 317 KM

Nearest Railhead: either Dehradun or Rishikesh

9) Dausa- Stepwells, palaces and royalty

Did you know, the bewildering step well that was featured as the ‘Pit’ in “The Dark Knight Rises”, is located in a small village in Rajasthan? That’s Dausa for you, a quaint traditional village located near Jaipur with many other historical marvels like Bhadrawati Palace and Khawaraoji. It’s one of the offbeat destinations near Delhi that you can visit with your family.

How to reach: 258 km

Nearest Rail head: Dausa

Source: http://traveltriangle.com/

MARRIAGE OF REGULATORS: FMC TO MERGE WITH SEBI TODAY

In the first ever merger of two regulators, over 60-year-old FMC (Forward Markets Commission) will merge today with the younger but much bigger capital markets watchdog Sebi to create a unified regulatory body. 

The Securities and Exchange Board of India (Sebi) was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers. 

FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment. 

The commodities market has been known to be more prone to speculative activities compared to the better-regulated stock market, while illegal activities like 'dabba trading' have also been more frequent in this segment. 

Besides, the high-profile NSEL scam has rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC's merger with Sebi. 

Taking forward the announcement made by Finance Minister Arun Jaitley in his budget speech earlier this year, FMC would be merged with Sebi with effect from today. 

The merger would be consummated here today at a function attended by Jaitley himself, along with Sebi Chairman U K Sinha and other top officials from the government and the regulatory bodies. 

This is the first major case of two regulators being merged, as against the relatively more frequent practice wordlwide of creating new regulatory authorities, including by carving out new bodies from the existing entities. 

Ready to regulate commodity trading, Sinha has cautioned small investors against coming for quick gains through speculation in this market, saying this is "risky" and requires a lot of technical expertise. 

"People will come and tell you that with a small margin, you can make a lot of money. Do not fall into the trap," the Sebi Chairman had said, even as he asserted that the capital markets watchdog was fully prepared to begin regulating commodities trading and all necessary safeguards would be put in place to keep the scamsters and manipulators at bay. 

Sinha said his message to the small investors would be to keep away from the commodities market as it was meant for the experts and for those seeking to hedge their risks. 

"If you put your hard-earned money into this market, it may not be ultimately good for you. The commodities market is for those who are experts in this space. For non-experts, it is a risky area," the Sebi chief had told PTI in an interview. 

FMC's merger with Sebi is aimed at streamlining the regulations and curb wild speculations in commodities market, while facilitating further growth of the market. 

At present, there are three national and six regional bourses for commodity futures in the country. Together, all the exchanges clocked a turnover of nearly Rs 60 lakh crore in 2014-15, from over Rs 101 lakh crore in the previous fiscal. 

Asked about the preparedness for regulating the commodities market and his assurance to investors, Sinha said Sebi has got more than 15 years of experience of managing and regulating the derivatives trading. 

Source: http://economictimes.indiatimes.com/

ETF OR MUTUAL FUND ?

For years, any investor who wished to invest in the markets without having to do a lot of homework, the easy option was to invest in one of the several mutual funds and sit tight. The basic concept here being that the fund manager has a certain expertise and hence will be able to generate good returns on the pool of money so collected.

While ETF’s have a history of their own, it was not until Vanguard hit the scene in 2001 that is started to become more and more noticed as a instrument of choice given the low cost such funds charged.

Over the years, there has been enough of documented evidence to prove that ETF’s may actually be a better tool to invest compared to a Mutual Fund. Both a Mutual Fund and a ETF provide relative returns – in the sense, returns are measured against a set benchmark. While a Mutual Fund manager tries to beat the market to justify his higher expenses, a ETF manager just needs to ensure that the ETF tracks its benchmark as closely as possible.

Unlike a Mutual Fund, a ETF manager cannot and will not buy outside his benchmark to help generate so called “Alpha”. At best, he may vary the weights but even that is not generally entertained given the fact that discretion can cause havoc with the tracking error.

In India, the ETF Industry is still in its infancy with only Nify Bees having some amount of liquidity. Also, there is widespread questioning about whether the Indian Markets are really suited for ETF’s with fund managers claiming that Indian Markets still provide for opportunities for fund managers to deliver Alpha and that ETF’s aren’t the best tool for investing in India.

Its tough to ignore that view since quite a few funds have delivered returns superior to the ETF / Index. But the question is, did they beat while sticking to the benchmark stocks? In majority of the cases, its not.

While Large Cap funds generally benchmark themselves to Nifty or CNX 100 / BSE 100, its not unusual to find in their portfolio names of stocks that are outside the said Indices. In bull markets, its these stocks that provide them the additional reward though in bear markets, they do have the ability (as shown in the fall of 2008) to drag the fund performance even below its Benchmark returns.

The question that one does come to finally is that if a Investor is able to split his investments between Large Cap ETF’s (Nifty Bees for instance) and ETF’s tracking Indices such as CNX 100 / CNX 500, would he be able to generate better returns.

A list of ETF’s (Equity) listed on the NSE can be found here (Link)

While both Nifty and CNX 100 are represented, its disappointing to see no ETF’s tracking the broader CNX 500 Index. Either way, unless there is more interest in ETF’s its doubtful to see fresh ETF’s being launched.

To decipher whether by dividing our capital, we can generate returns similar to the best mutual funds, I used Nifty Bees for Nifty and the respective Indices, CNX 100 and CNX 500. Since NSE does not provide total return Indices for Indices other than CNX Nifty, I used the general Index.

The key difference is that in all the above tickers I have used, I have not accounted for dividends that get paid. While small, these do have a impact on the overall returns if the same is invested back.

To answer the question as to how much one should invest in Nifty and how much in a CNX 100 / CNX 500 ETF, I drew the following matrix

The returns generated above are CAGR returns (without accounting for Dividends). In case of Mutual Funds, all the selected were Growth Schemes

Top 10 Mutual Funds are selected based on Category and look back period. So, 18.37% represents the average return of the top funds over the last 3 years. Now, a few may be in the other brackets and a few others may not be. Idea was to select and compare with the best possible (which is known only in hindsight) options.

Even in the above matrix, there are issues when it comes to comparing against ETF’s. For instance, the the top performing fund on the 1 year look back was ICICI Prudential Advisor Series -Very Aggressive Plan (G). Now, the plan is more of a Allocation Model with 80% of its funds being invested in Debt and only 20% in Equity. Its no wonder that even as the broader market showcased negative returns, this generated strong Alpha. 

As the above table clearly lays out, investing 60% in CNX Nifty tracking ETF and 40% in CNX 100 tracking Index provides the best return which beats the return of almost all Mutual Funds. And best of all, you do not need a Advisor to guide you since all it requires is a call to your broker and buy the concerned ETF’s in the proportion that one is acceptable with.

And when it comes to the question of how much to invest, do take a look at our Allocation Matrix (Link). All in all, investing is simple, all it requires is a bit of discipline and hard-work of buying and you can be your own fund manager.

The biggest advantage of a ETF over Mutual funds is the fact that you can exit whenever you want without having to worry about paying load (which can be pretty huge) due to the short amount of time spent with the fund. This allows for better allocation as you can move in and move out without the need to wait for the minimum time to elapse.

SOURCE: By Prashanth @ http://www.portfolioyoga.com/

FED ANGST GIVES STOCK TRADERS MORE REASONS TO DOUBT PROFIT BOUNCCE

SOURCE: Oliver Renick and Dani Burger @ www.bloomberg.com

• Equity traders left guessing about the future of global growth
• Lamenting a lost chance to finally get rate increase over with

They didn’t raise rates. Do they know something?

Among U.S. stock investors, imaginations are racing over whether the Federal Reserve’s refusal to boost interest rates says more about their view of the world economy than they are letting on. While equity bulls are happy for more months of zero-percent stimulus, a bigger issue is whether inaction bespeaks deeper concern about global growth at a time when corporate earnings have stopped going up in the U.S.

In typically frenetic trading, the Standard & Poor’s 500 Index ended Thursday with a loss, declining 0.3 percent to 1,990.2 and erasing a rally that reached 1.3 percent at the beginning of Janet Yellen’s press conference. Gains evaporated as the Fed chair spoke about the potential for stress in emerging markets to spill into the U.S.

“That they didn’t start today and continue to wait still gives caution that the underlying economy around the world isn’t as strong as they like to see,” said David Lyon, global investment specialist at JP Morgan Private Bank, which oversees about $1 trillion. “This becomes three months of additional time where the Fed decision is still the black cloud overhanging the market.”

Shares lost 0.26% on Thursday

Another black cloud is not what equity traders were hoping for after corporate profits fell in the second quarter even as profit-based valuations reached the highest in five years. Since the third quarter of 2014, gains in quarterly income have averaged 3 percent in the S&P 500, down from 17 percent since the bull market began.

Among other things, inaction by the Fed puts the focus back on concerns such asChina’s economy and plunging commodities, stresses that sparked a selloff in mid-August that at its worst erased more than $7 trillion from global equity values.

“The market will quickly turn around and say, hold on a minute, if they can’t raise rates with unemployment where it is, then you’re really worried about the potential impact with what’s going in emerging markets and commodities and so on,” Stewart Richardson, chief investment officer at RMG Wealth Management LLP in London said Wednesday. “If they cant do it now, they’ll never be able to do it.”

The Fed’s statement warned that economic and financial developments around the world may restrain economic activity and curb inflation. Yellen mentioned the outflow of capital from developing countries and pressures on emerging market currencies in her Q&A session.

Bad news

The refusal to hike was bad news for a significant constituency of traders who hoped Yellen and her colleagues would get the first rate increase over with as a way of affirming faith in the U.S. No increase underpins concern that policy makers doubt that momentum seen in everything from American gross domestic product to retail sales will prove durable.

“I’m completely and utterly bored sick of the whole thing and I think that it’s completely irrelevant whether the Fed raises rates by 25 basis points,” David Hussey, head of European equities at Manulife Asset Management in London, said before the decision. “What is important is, is China really blowing up, is a recession about to happen in emerging markets, what’s going to happen to commodity prices?”

Hike or not, the outcome of Thursday’s meeting is sure to test resolve in an American equity market where the third-longest bull market on record has recently ground to a halt. The S&P 500, up almost 200 percent in the 70 months through December, has fallen 3.3 percent this year, including its first 10 percent correction since 2011.

Also-Rans

As the trend turned, U.S. shares have changed from being among of the world’s best investments, from 2010 to 2014, to rank also-rans. Over the first 5 1/2 years of the bull market the S&P 500 beat the MSCI All-Country World Index by more than 60 percentage points, rallying 204 percent through 2014. Since the start of 2015, the U.S. index is down about the same as the global gauge.

“There could well be fears that it is due to a weakening growth environment, which will send a negative tone to equity markets,” said Pau Morilla-Giner, the chief investment officer at London & Capital Group Ltd. “This feels like a Catch 22 situation especially when one considers the low sentiment-high fear factor dominating equity markets currently.”

VIX plunged and recovered intraday

Thursday’s reaction extended the worst equity rout since 2011, a stretch dating to mid-August that began with concern over China’s market meltdown and worsened as commodity prices tumbled and the dollar surged, potentially crimping profits at exporters. Even after rising in four of the five days before Thursday, the S&P 500 is down 5.3 percent since Aug. 17.

Investors in the pro-rate hike camp point out that stocks have weathered Fed tightenings in the past. Since 1946, following the initiation of 12 tightening cycles defined by Ned Davis Research, the S&P 500 was higher a year later eight times and posted an average 12-month return of 2.5 percent.

But past tightenings also began when the stock market was much less turbulent than it is now. Over the month leading up to the 12 cycles since World War II, the S&P 500’s average daily move, a rough measure of volatility, was less than 0.6 percent -- 15 percent lower than usual. While some investors said that meant markets were too unsettled to hike, the alternative could be worse.

“The Fed’s mandate isn’t to cause stock returns,” George Schultze, who oversees $200 million as founder and managing member of Schultze Assset Management in Purchase, New York, said by phone. “We’re due for a higher rate now. If inflation continues to climb because interest rate policy is too aggressive for too long, it’s a bigger risk for stocks.”

Indian context

This rally may not sustain. The FED seemed almost scared of China situation. And btw if an export led Chinese economy is witnessing serious slow down and US imports from China are still the highest, what does it really say about the US economy?

Not to forget, federal reserve is itself carrying very high amount of debt assets on its balance sheet.

The Q2 results of companies here in India are gonna be nothing to write about.